State prosecutors confer over US mortgages probes

More than a dozen US state attorneys-general met in Washington this week to share litigation strategies and investigative findings from their mortgage-related probes into leading US banks, people familiar with the matter said.

The states, some of which have sued banks including JPMorgan Chase and Bank of America, discussed ways they could pool their resources for future mortgage-related investigations and lawsuits against large financial institutions, raising the spectre of protracted lawsuits for investors in bank stocks whose shares were hammered last year in part due to litigation fears.

At least 10 state attorneys-general attended the meeting, with additional aides from other offices bringing the total number of states in attendance to 14.

Many of the prosecutors also talked about their general displeasure with a potential $25bn deal currently under discussion between the Obama administration, several states and JPMorgan, BofA, Wells Fargo, Ally Financial and Citigroup to resolve allegations of mortgage-related abuses including improper home seizures.

A settlement would likely impede states from launching foreclosure-related investigations involving the targeted banks, according to people familiar with its current terms.

Half of the states in attendance had previously indicated their unhappiness with the terms of the still-evolving settlement, suggesting that displeasure with the deal is spreading. This unrest among state prosecutors is threatening the possibility of a mass agreement between states and banks over mortgage-related matters that was heralded early last year.

The states that met are home to roughly three in 10 US home mortgages, according to data from CoreLogic, a real estate research firm.

Negotiators from the five banks and various government agencies involved in the settlement talks met again in Washington on Wednesday and Thursday. No deal has been reached, people familiar with the matter said.

A spokesman for the Department of Housing and Urban Development, the federal agency spearheading the multistate settlement talks, declined to comment.

“Through frequent conference calls, [negotiators] have kept state attorneys-general apprised of developments and have received helpful feedback and constructive input,” said a spokesman for Tom Miller, Iowa attorney-general.

Obama administration officials including Tim Geithner, Treasury secretary, and Shaun Donovan, housing secretary, said last year that a deal to resolve allegations of foreclosure improprieties including the seizure of borrowers’ homes without proper documentation would soon be reached.

Since then, three of the state legal officers in Tuesday’s meeting – those from Massachusetts, Nevada and Delaware – have launched suits against leading financial firms, including BofA, Merscorp, owner of a national private electronic mortgage registry used by much of America’s housing finance system, and Lender Processing Services, a back-office provider used by large banks for mortgage-related matters and foreclosure proceedings.

The suits generally allege consumer harm and deceptive practices. The companies have denied the allegations.

Other states at Tuesday’s meeting, including New York and California, have active investigations into companies including Citigroup and BofA. New York last year accused BofA in court papers of fabricating legal documents used in home repossession proceedings against delinquent borrowers.

The other states exploring the possibility of launching or joining probes against leading financial firms include Oregon, Maryland, Kentucky, Minnesota, New Hampshire, Hawaii, Missouri, Montana and Mississippi, people familiar with the matter said.